Update on Trading and Cyber Security Incident

Press Release

Morgan Advanced Materials plc

7 February 2023

Update on Trading and Cyber Security Incident

Morgan Advanced Materials plc (the "Group") provides an update on trading results for 2022 and on the cyber security incident previously announced on 10 January 2023.

Key points

-           FY2022 trading performance expected to be slightly ahead of market expectations

-           In response to the cyber security incident:

o All manufacturing sites are operational

o Resolution of systems issues continues at pace

o H1 2023 demand remains strong, but production inefficiencies expected to impact FY2023 adjusted operating profit by 10% to 15%

o FY2022 preliminary results now expected to be announced by end of April 2023

Trading Update

Revenue growth remained robust in the final two months of the year with revenue expected to be around £1.1bn, representing growth of 16% or 11% at constant currency.  FY2022 adjusted operating profit is expected to be slightly above the top-end of the range of analysts' forecasts¹.  Net debt at the year end was £148.6m, in line with market expectations and 0.8x EBITDA.

Cyber Security Incident

As announced on 10 January 2023, the Company is managing the consequences of a cyber security incident having detected unauthorised activity on its network.  Immediate steps were taken to contain the incident, launch incident response plans, engage specialist support services and embark on restoring systems.

All manufacturing sites are operational, although some continue to use manual transaction processes as work continues to restore their systems.  A small number of systems have proven irrecoverable and so we are accelerating the implementation of a new cloud-based ERP solution at the affected sites. 

All appropriate regulatory authorities have been informed of the incident.

Exceptional costs associated with the incident could amount to approximately £8m to £12m, comprising specialist professional fees, as well as costs associated with recovering a number of systems across the Morgan Group.

It remains challenging to estimate precisely the extent of any impact on our H1 2023 trading. During January, a number of sites experienced a delay in restarting production and shipping due to the cyber security incident. Whilst demand has remained strong during January, we are experiencing production inefficiency during the recovery period which, based on current estimates, could lead to adjusted operating profit for FY2023 being approximately 10% to 15% below our previous expectations.

The Group has a strong balance sheet and does not expect the incident to have a material long term impact.

 ¹ Company compiled consensus for adjusted operating profit is £139.2m, with a range of £133.5m to £145.0m.

2022 Preliminary results timing

As a result of the systems impact from the cyber security incident, we are working with our auditors to reschedule the audit of the 2022 preliminary results and currently expect to be able to issue them by the end of April 2023.

Revised dates for our FY2022 preliminary results and our 2023 Annual General Meeting will be published in due course.

This announcement contains inside information. The person responsible for arranging the release of this announcement is Richard Armitage, CFO. The company's LEI is I4K14LL95N2PHDL7EG85.

For further enquiries:

Pete Raby, CEO                                 Morgan Advanced Materials plc                                01753 837000

Richard Armitage, CFO

Nina Coad                                           Brunswick                                                           0207 404 5959

All financial information included in this announcement is sourced from unaudited management accounts and excludes any specific adjusting items. This announcement contains certain forward-looking statements that are based on management's current expectations or beliefs as well as assumptions about future events.  These are subject to risk factors associated with, amongst other things, the economic and business circumstances occurring from time to time in the countries and sectors in which the group operates.  It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a wide range of variables which could cause actual results, and the group's plans and objectives, to differ materially from those currently anticipated or implied in the forward-looking statements.  Investors should not place undue reliance on any such statements.